By Tiernan Ray

Shares of professional networking platform and enterprise software vendor LinkedIn (LNKD) are down $13.36, roughly 6%, at $210.09, after the company yesterday afternoon beat Q4 expectations, but offered an outlook for revenue that disappointed.

Some price targets are going down this morning, but several bulls also stepped in to defend the shares.

Beyond a muted outlook, and user growth that was below what some were looking for, the Street today had to deal with the prospect of stepped up spending by the company, causing cuts to profit estimates for 2014 by both bull and bear.

The bulls argue spending today will produce favorable return on investment down the road.

There was one upgrade, that I can see, from SunTrust Robinson Humphrey’s Robert Peck, who raised his rating to Buy from Neutral, and raised his price target to $260 from $250, writing that the outlook is “conservative,” and that 2014 is a “year of investment,” while 2015 will be when the company “harvests” the results of that investment.

Reviewing the forecast, Peck thinks the company is lowballing what it will deliver:

The midpoint of 2014 revenue guidance implies a +20 point drop in 2013′s 57% growth rate, which seems excessive given the new products being launched like Sponsored Stories and Sales Navigator. Further, while we agree with the company’s decision to invest more against its large opportunity, we think flat margin guidance of 25% is also conservative. Lastly, we would expect 2015 to benefit form 2014 investments, augmenting top line growth and expanding margins significantly.

Peck sees the company’s valuation as low compared to, say Facebook (FB) and Google (GOOG), given higher expected growth. LinkedIn’s multiple of 2015’s projected revenue is 7.8 times, he notes, for perhaps 41% growth, for a PEG of 0.19, versus PEGs of 0.3 for Facebook and 0.29 for Google.

William Bird, FBR & Co.: Reiterates a Market Perform rating, and a $190 price target, and cut his estimate for profit this year to $1.02 per share from a prior $2.12, on revenue of $2.12 billion. “Unique visiting member growth of 31% (including mobile) dipped below member growth of 37%, suggesting some deterioration in engagement. For comparison, in Q3 unique visiting members grew 49%, outpacing 38% member growth [...] we believe the market may be mispricing LNKD’s revenue potential [...] After accounting for terrestrial-to- digital price destruction (in the talent acquisition market) and 100% sellout rates in marketing solutions, we think it is apparent that LinkedIn’s revenue opportunity is significantly smaller, closer to $10 billion.”

Stephen Ju, Credit Suisse: Reiterates an Outperform rating, and cuts his price target to $274 from $288. He cut his estimates for this year to $1.21 billion and a 58-cent loss per share from a prior $1.26 billion and a 57-cent profit. “LinkedIn announced its intent to step up investment into sales and product development against efforts such as Sales Navigator as well as expansion in China. While this results in near-term margin compression, this does place the company on a likely greater operating profit dollar and FCF growth trajectory over the longer term […] Our Outperform rating for LNKD shares continues to be predicated on three key points: LinkedIn’s current roster of a little over 24,000 corporate solutions clients implies a minority penetration rate for Talent Solutions on a global base of ~745k addressable businesses that have more than 100 employees; The company’s all-you-can-eat subscription model undercharges enterprise customers and longer-term LinkedIn can potentially price on a more lucrative per-lead transactional basis; Over the longer term LinkedIn can leverage its unique data set to place the right ad in front of the right user at the right time, driving ad inventory pricing higher […] Sponsored updates contributed ~13% of the Marketing business revenues, which translates to almost $15 million in revenue from none two quarters ago. We expect them to continue to gain traction and to be differentiated from other social news feed ads with a B2B focus. The posts should also help the company monetize more of 40% of its visitors who visit the site on a mobile device, as mobile revenues are currently very small.”

Martin Pyykkonen, Wedge Partners: “We think LNKD will beat their initial guidance as the year develops, based on corporate account growth, deeper account penetration, long runway opportunity in foreign markets and the initial ramp for Sales Navigator, which we think will evolve into a comprehensive Sales Solutions portfolio over the next few years […] Talent Solutions revenue from foreign corporate customers is still only ~30% of Talent Solutions total revenue run rate. LNKD still has a long domestic runway to drive Talent Solutions portfolio, including with pricing power as more functionality is added to licensed software. The foreign TAM for Talent Solutions is even greater as LNKD still only has twenty foreign sales offices in major cities. We also expect the current Sales Navigator product will develop into a full portfolio/suite of licensed software in a similar way to how the original Recruiter point product developed into the Talent Solutions portfolio […] We think there is a solid outlook for sustaining total revenue at or least near 50% next year. “

Eric Sheridan, UBS: Reiterates a Neutral rating, and cuts his price target to $225 from $250. “We were less impressed with a) decelerating corporate customer growth & revenue per corporate customer (despite price increases); b) User growth and disclosed engagement metrics that showed deceleration from recent trends; and c) 2014 guidance that realized some investor fears of a range of 30-35% YoY rev growth and also included a lack of margin leverage that was in Street estimates […] Going forward, we do not expect LinkedIn’s management to change their focus from developing the platform for long term goals of member growth, user engagement & the global economic graph. In the medium term, we expect those goals to keep margins depressed ahead of a possible revenue reacceleration. As long as LinkedIn faces decelerating revenue growth and a lack of margin leverage, we expect the stock to be range bound.” Sheridan cut his 2014 estimates to $2.1 billion and $1.80 per share from a prior $2.2 billion and $2.28.

Rory Maher, Hillside Partners: Maintains the equivalent of a Hold rating, without a formal rating. “Total users grew, to 277M cumulative members, up 37% in 2013. But usage metrics showed the second sequential quarterly slide. Unique users were 139M in 4Q13, down from 1Q13 143M peak. Page views in 4Q13 were 10.6M, off 9.4% from the 2Q13 peak of 11.7M […] Mobile visitors accounted for 41% of unique LNKD traffic in the quarter, up from 38% in 3Q13. We expect this number to exceed 50% by mid-2014 […] We believe investments cited by management in lower-then-expected EBITDA margin guidance will likely generate solid returns over time and we are comfortable with the Company’s track record investing in products/markets that have driven strong returns (Sales Navigator, Pulse, many content/engagement additions in 2012/2013 to name a few). However, we believe investors have likely been assuming more growth with limited investment over the long-term as Linkedin has proven to be a very scaleable product to-date.”

Michael Graham, Canaccord Genuity: Reiterates a Buy rating and cuts his price target to $250 from $270, and cuts this year’s estimates to $2.11 billion and $1.43 per share from a prior $2.16 billion and $2.33 per share. “Total members grew 37% y/y to 277 million, as the company added nearly 18 million users in the quarter. About 66% of total members now come from international markets. LinkedIn also added 2,443 new corporate solutions customers, up from 2,418 added in Q4/12 and up sequentially from 1,745 added in Q3/13 […] Focus in Talent is shifting somewhat from growing the customer footprint to gaining more business from existing LCS customers and developing more products to better segment the corporate market. For the next year, it seems like the upside potential for revenue estimates will come more from Marketing and Premium, and investments will take priority over profits. We believe the outlook is slightly muted, but still very attractive.”

Blake Harper, Wunderlich Securities: Reiterates a Buy rating, and a $280 price target, and cuts this year’s profit outlook to $1.48 form a prior $2.22. “The company continued to provide conservative guidance, which was slightly below Q1 and FY14 revenue and EBITDA estimates, which should allow room for continued upside […] Unique member visits grew 31% Y/Y and member page views grew 48% Y/Y and cumulative registered members grew to 277 million, just slightly below our forecast […] Sponsored updates contributed ~13% of the Marketing business revenues, which translates to almost $15 million in revenue from none two quarters ago. We expect them to continue to gain traction and to be differentiated from other social news feed ads with a B2B focus. The posts should also help the company monetize more of 40% of its visitors who visit the site on a mobile device, as mobile revenues are currently very small […] The company has been investing its capex in building its own data centers and 2104 should also see elevated levels around the mid-teens percentage of revenue. The company is also planning to invest aggressively in R&D and Sales, as well invest in a dedicated Sales Navigator product, an enhanced mobile experience, and the Chinese market in 2014. We expect the company to get a positive ROI from these investments, especially from its Sales Navigator and China potential.

John Blackledge, Cowen & Co.: Reiterates a Market Perform rating, and a $220 price target, and cuts his estimates for this year to $2.14 billion and $1.92 from a prior $2.15 billion and $2.09 per share. “Total members reached 276.8MM, up 37% y/y (and vs. 38% y/y last year) and compared to 259.2MM last quarter and our 275.2MM forecast. LCS customers were 24,444 (+49% y/y), decelerating from last quarter’s 22,001 (+57% y/y) and slightly below our 24,721 estimate […] We view the rollout of the Sales Navigator product to be potential source of upside which could boost revenue estimates. Additionally, detail around the member base, whether it be growth overseas or accelerating or decelerating growth has the potential to influence share prices.”

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.